China Faces 74% Drop In January EV Sales As Incentive Uncertainty Rules

1 month ago by Mark Kane 15

The Cadillac CT6 Plug-In (Made In China)

China’s plug-in electric vehicle sales got off to a very rocky start in 2017.

In fact, January results plunged by 74% year-over-year…the kind of drop we are not accustomed to seeing anywhere else in the world when it comes to EV sales.

China

In total only 5,682 NEVs were sold, while production decreased by 69.1% to 6,889.

Especially interesting is collapse of plug-in hybrid sales, down to just 704 (down 90%), while BEVs noted 4,978 deliveries.

In 2016, China logged sales of 507,000 vehicles, missing an over ambitious target of 700,000.  For this year, the only slightly higher target of 800,000 deliveries indicates even the government knows there is trouble brewing…but with January’s poor result, that number looks to already be unobtainable.

Why the sales drop?  Uncertainty and the pullback of incentives.

Sales falling as incentives decreased by 20% according to Chinese sources, while there is even stronger hit coming from government:

“The system received a major shock when manufacturers were informed at the end of last year that all of their vehicles would be re-evaluated for inclusion in a catalog of models eligible for subsidies. But the revised catalog, which previously covered 2,193 models from 235 producers, has yet to be published, leaving the industry in limbo.

“According to the rules, all products must first be included in the catalog, and only after that can manufacturers get subsidies for sales and promotions,” CAAM official Xu Haidong said. “The new catalog hasn’t come out yet, so manufacturers don’t dare to sell because if they do, they can’t receive any subsidies.”

Xu added that the uncertainty is likely to affect sales through February and March, but levels should rebound after the new catalog comes out. He predicted that overall sales should reach 700,000 to 800,000 units this year as clarity returns to the market when the catalog is released.”

Situation should become clear in two months or so.

source: Caixin

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20 responses to "China Faces 74% Drop In January EV Sales As Incentive Uncertainty Rules"

  1. Nemo says:

    2193 models?!

    1. Jay Cole says:

      ….which is why there will never be an InsideEVs’ China Monthly Plug-In Sales Scorecard

      1. Jay, just put in a simple qualifying value: Electric Models with 4 wheels and over 100 miles range! Or, Electric Vehicles capable of more than 70 Mph top speed!

        1. Mikael says:

          That rule is already in place. To be called NEVs and get subsidies you need to obey rules like that.

          So PHEVs need a long enough range, BEVs a minimum range and do over 100 km/h.

          If they included low speed, low range vehicles the list would be a lot loner. China sells tens of millions electric vehicles every year.

    2. WadeTyhon says:

      I believe a large majority of these are tiny NEVs (Neighborhood Electric Vehicles) that are maybe a step or two above golf carts in size, range, and build quality.

      The models are manufactured in small numbers and they are very cheap, especially when considering incentives. At least that’s how I have come to understand it.

      1. Nix says:

        Let me start by saying that I don’t actually know the answer. But there has been confusion in the past about China’s EV’s due to the way they use the acronym “NEV”. NEV stands for “New Energy Vehicle” in China, not “Neighborhood Electric Vehicle” like in the US.

        That has caught up more than one person who thought a specific NEV in China was a US style NEV, instead of a full highway capable EV. So Chinese full EV’s labeled as NEV’s have been confused for US NEV’s in the past.

        1. WadeTyhon says:

          That makes it very confusing indeed!

        2. Pushmi-Pullyu says:

          Right.

          One thing to keep in mind is that in China, there isn’t any regulatory divide between the small, low-speed EVs which we in the U.S. call NEVs (Neighborhood Electric Vehicles) and larger, highway-capable EVs. Some Chinese make BEVs and PHEVs have a top speed of ~50 MPH; some are just a bit faster. Where do you draw the line between what’s highway-capable, and what’s not, when you have vehicle performance and top speeds across a broad spectrum like this? Obviously there isn’t any easy answer here.

          Here’s an article from 2008 about the “explosion” of small cars made in China, altho of course most of those are gasmobiles:

          http://articles.sae.org/2920/

  2. unlucky says:

    This is very detailed coverage, indicating that some of this is sort of a holding pattern and not a crash.

    But nonetheless, I think it should be said that some of this drop may be because of the government cracking down on fraudulent sales. Some of that drop isn’t a drop but a disappearance of falsely reported sales.

    Also, the indication of the number of models very much underscores the need for the Chinese Government to accelerate their effort to create consolidation in the car market in China. That’s just far too many companies making cars. It’ll never be efficient. Consolidation will allow the remaining car companies to have more money to invest in engineering, design and advancing the state of the art.

    If China is to become a truly big (percentage-wise) market for EVs it’ll have to be from domestic company success. And the current climate just doesn’t favor them because they are spreading their efforts too thinly to compete.

    1. Pushmi-Pullyu says:

      A few years back I read an article which claimed the Chinese central government was going to shut down 90% of domestic auto makers, to force the very consolidation which you rightly say they desperately need.

      But I never saw any follow-up on that, so I guess it didn’t happen.

      As I understand it, the main problem (or at least a major contributing factor) is all the protectionist laws and red tape on the local and regional (Prefecture) level which favor sales of cars made locally or regionally, making it difficult or perhaps impossible for an auto maker located in one Prefecture to sell cars in another.

      Shutting down 90% of the auto manufacturers sounds shockingly draconian, but when you’ve got (according to this article) 235 producers, most of them too tiny and too short-lived to be real market contenders, then shutting down 90% would likely be good for China’s national industry. But just shutting them down would be treating the symptom, not the cause. The situation with local protectionism which created all these tiny auto manufacturers that pop up quickly and disappear perhaps even faster, would just create a new crop of similar companies to replace the shuttered ones if the root causes are not addressed.

      1. unlucky says:

        I agree with all of what you said there but to add a tiny bit more a lot of it comes from what Pandish points to below.

        There really isn’t a Chinese government, instead it is the Chinese Communist Party running the country. Party members can work together to get their own companies funded. These companies then become state-owned. The ones that grow become the large state-owned enterprises we hear of but the smaller ones do often stick around. Apparently a large number of regionally-important party members got their companies funded and once they are funded they direct the areas of the country they represent to patronize their company. It makes sense for them personally and it does follow the idea of the province putting its own money back into its own province.

        That’s part of the reason for the segregation you speak of. Honestly for more just go straight to Pandish, he seems to have the most detailed grasp on the situation of anyone here so far.

      2. SJC says:

        They were going to license EV makers, there would too many so they wanted consolidation.

  3. Nix says:

    The most bizarre part of all of this, is that most of China’s largest native car companies are actually state owned.

  4. Pandish says:

    Because China is special it’s not even the state, well not central state. Because China doesn’t work like that, it has Chinese characteristics which make policy at times dysfunctional.

    Let’s divide state ownership into three categories. Provincial ( or Regional in the case of the provinces whose names will not be spoken and require extensive paramilitary padding … ) ownership. Executive ownership ( Xi + Li, that is President + Prime Minister ) and CCP ownership ( you’d expect it to be Xi + Li given that Xi is now core leader but it’s more often than not Jiang’s Clique which still controls a chunk of the politburo via the party secretary of the standing committee Zhang )

    So while those car plants are state owned, they are more likely owned by the provincial governments.

    The regulation in question had to do with reduction of the subsidies in new car loans. For which I would hmm tag the PBOC and Politburo as loans are getting out of hand ( 2 trillion Yuan in new loans January, again this is a real we can comment on the viability of the Chinese printing press but here is not the right place for it. Faraday Future is an example of the printing press coming to a halt ) according to the PBOC and the Politburo is out to cause some mischief against Xi and LI before the important party congress in May ( ascension ceremony ). And I suppose the guidance on EV sales in China comes from Xi.

    As for the frantic requests for loans and money for consumers to buy local cars so that while domestic consumption of fast moving consumer goods in China in 2016 rose by 2,9% ( not making this number up, it’s official ) car sales added over 2 million ( close to 10% ). These would come from provincial governments directed towards the state owned banks. As provincial governments have 2 sources of income, land sales and the state owned companies they control and possibly optimising existing costs ( which is why EV Garbage Trucks and Busses may continue at current levels and be even more diligently monitored for fraud, the plan for corruption is to take honey from the left over pot, not to cut the pot before hand ).

    Now add to that that the only way for a young communist official to advance is for his pet project to show good progress publicly and that some of those are tasked with cutting credit burden and some are tasked with building EV brands that present themselves on the world stage and some are tasked with rooting out corruption or waste and schemes and it gets weird. To complicate matters further they usually use a sledgehammer approach when a directive gets priority as you can see here.

    Should probably remind you of a Chinese Dynasty and its court with court officials battling it out. Because it’s more or less well that.

    1. Nix says:

      +1 Thanks for the explanation.

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